Getting High on High Growth Markets
In a world of anti-globalization where Brexit, troubled Trans-Pacific Partnership (TPP) and changed North American Free Trade agreement (NAFTA) exist, it is important for business leaders to re-think the approach to their non-traditional markets. Free trade is moving towards fair trade and getting the formula right is important for the future of any enterprise.
From the perspective of living in developed countries, if looking at the phenomenal growth of international markets, you wonder how to best penetrate these high growth markets (HGM). Some call them emerging markets, but for the people in those markets, they have already leapfrogged into the new economy growing at least 3x-developed economy GDP growth rate. These markets are attractive, fragmented, political, risky and challenging, but they shouldn’t be ignored. Entering these HGM markets should be a deliberate strategy, and it’s certainly not an undertaking for leaders who are faint of heart.
If you’re already operating in these HGMs, and your growth is in the low single digits, and / or your market share is less than 5% to 10%, you either need to get out or think about taking drastic actions.
If you are growing at high single digits and your market share is between 10% to 20%, you need to refine your business models in order to become more competitive.
Finally, if you are growing at double digits and your market share is north of 25%, congratulate yourself and continue to defend your market share and grow profitably.
For those of you who are looking to fuel growth, there are few tricks to succeed in these HGM’s. Unfortunately, implementing them and getting the entire organization to support it can be a challenge in any multi national companies. There are companies, who, decades ago, ventured out of their traditional markets, and are now reaping the benefits of their investments. However, it’s important to note that the senior leaders and board members in these companies had the necessary international experience to deal with the challenges of the HGMs’.
After living and working for industrial companies in 5 countries, I’d like to share 3 important considerations in your pursuit for growth:
1. Right Mix of Products and Services — One frequent mistakes some companies make, is to push all products and services to all markets, without considering carefully enough customer preferences, applications, branding, channels, and profitability.
Unfortunately, there are certain markets that still have No-India and No-China procurement policies. Getting the voice of customer to determine the optimum mix of products & services, including local delivery — is key to success. The front-end missionary work needed to influence specification on engineered products is key to value selling for those products manufactured in these markets.
Product localization is moving towards Product regionalization where products are designed and manufactured in HGM for a broader customer pool to achieve economies of scale. Branding and pricing decisions have a big impact on how you sell and profit from these markets. Be careful localizing your highly engineered products when customers are still willing to pay a premium to import it. Differentiating your offer by having local servicing & process engineering capabilities can improve your chances of winning against the growing domestic competition.
2. Customer Segmentation and Channel Strategy — This is where your local sales team can make a big difference in identifying the right customer segments and then figuring out the optimum channel mix. I’ve observed how companies can get caught up between Direct Channels and Indirect Channels without paying close attention to what it takes to sell an engineered product. Smart companies allocate the right mix of selling cost between these two models to achieve optimum sales. Channel management is another core competency of successful companies; proactive channel management and channel support is needed to achieve accelerated growth.
3. Super Matrix & Super Talented Organization — No matter which way you organize yourself, you cannot avoid forming a matrix organization to connect the business units (BU), which own the intellectual property, the customer sales points (Regional Sales) and the functional support (HQ/Local). The key to success is not the organization, but the collaboration and partnership needed to make the enterprise work. Progressive companies use collaboration as a metric with their senior executives to achieve the synergies between the working units.
Building solid competencies and capabilities within the local teams, empowering them to make faster decisions and holding them responsible to deliver customer value is key to success. Cross-pollinating leadership & technical talent between regions and BU will help build the competencies needed in the field.
Finally, it’s critical to create a fast lane to decision-making centers so that important decisions are not languishing in the field for a long time.
Now, none of these are new ideas but to operationalize them, you need alignment on the culture, strategy and leadership — that combination drives success.
As John le Carre once said, “a desk is a dangerous place from which to view the world”.
Venturing out into these new markets to meet your customers and more importantly, your team in the HGM, will help craft your decision on growth. Do not be afraid to take calculated risks with your business model. Listen to what your team is saying in the field because these men and women, who represent your company, feel the pulse of your customers and competition daily.
